The Latest PBO

The Department of Transportation this week announced a plan to make the Saint Lawrence Seaway Development Corp. a performance-based organization.

The corporation is the third agency in the federal government to seek PBO status. The U.S. Patent and Trademark Office and the Defense Commissary Agency both have pending legislation to become PBOs.

As a PBO, the Saint Lawrence Seaway Development Corporation would be headed by a chief operating officer instead of an administrator. The chief operating officer and the Secretary of Transportation would set performance measures for the corporation each year. If the measures were met, the chief operating officer could receive a bonus of 50 percent of his salary. If the measures were not met, the chief operating officer could lose his or her job.

Though the corporation already functions much like a performance-based organization, because it is a government-owned corporation, as a PBO it would receive additional personnel, procurement and management flexibilities. The corporation would be freed from many departmental requirements, though the chief operating officer would still answer to the Secretary of Transportation.

The PBO concept is a brainchild of Vice President Gore's National Performance Review. Its basic premise is that certain government programs could become more efficient if they were allowed to throw off many of the personnel, procurement, management and budget restraints most agencies must operate under and adopt practices that mirror private sector operations. That includes making senior management officials accountable for results.

While some aspects of turning an agency into a PBO can be done administratively, major changes involving budgeting and salaries require congressional approval.

The Saint Lawrence Seaway Development Corporation, in cooperation with the St. Lawrence Seaway Authority of Canada, operates locks and channels on the St. Lawrence River, connecting Great Lakes ports to the Atlantic Ocean. The corporation estimates that 45,000 jobs and $2 billion a year in personal income are directly generated by shipping on the seaway.

The corporation has 164 employees. It is funded out of the Harbor Maintenance Trust Fund, which was established after the U.S. created a national harbor maintenance tax on foreign cargoes handled at U.S. ports.

The seaway corporation's deputy administrator, David Sanders, who is the highest-ranking official there since the administrator resigned May 1, said his agency was hesitant to jump on the National Performance Review's PBO bandwagon.

"We came to the PBO process as skeptics," Sanders said. "We came away as true believers that becoming a PBO is the right course of action."

Sanders said that as a PBO, the corporation's budget would be tied to the amount of international trade that goes through the Saint Lawrence Seaway. The corporation would thus have an incentive to increase trade into the Great Lakes region.

In addition to increasing trade, the chief operating officer would be given an incentive to meet three other performance goals: improving safety on the seaway; ensuring the seaway's reliability; and improving customer service and fiscal performance.

Sanders said the PBO model recognizes that providing incentives improves performance.

"People in government are human beings," Sanders said. "Government executives are highly motivated people. But they can be additionally motivated by incentive and consequence."

Sanders said, however, that it is important to make sure people don't think performance-based organizations are a way for government executives "to cut sweet financial deals for themselves."

Becoming a PBO may also open the Canadian authority to performance-based management. "Canada wants the same things we do. They also want a seaway that's reliable and fiscally accountable," Sanders said. He said he sees no reason the U.S. corporation and the Canadian authority could not become "the first bi-national performance-based organization."

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